European banks warn of stablecoin squeeze as dollar tokens dominate

European banks are growing more worried that the region could lose ground in the next phase of digital money, as dollar-backed stablecoins continue to set the pace globally. The Euro Banking Association has now put tokenized money, including stablecoins and tokenized deposits, firmly on the agenda, arguing that Europe needs a stronger domestic payments stack if it wants to avoid dependence on foreign infrastructure.

The association’s new report looked at stablecoins issued by banks and electronic money institutions, tokenized deposits, deposit tokens and real-world use cases. It did not include CBDCs or cryptocurrencies such as Bitcoin. That narrow scope matters. The debate in Europe is no longer about crypto speculation, but about who controls the plumbing of payments once money itself starts moving on blockchain-based systems.

The EBA said the market is still early, but the competitive pressure is already visible. Visa and Mastercard have expanded stablecoin experiments, BlackRock has launched tokenized products, and major banks have run blockchain pilots and cross-border payment tests. For Europe, the uncomfortable conclusion is that dollar-based stablecoins could deepen the greenback’s reach in digital finance if euro-denominated alternatives do not scale fast enough.

That leaves Brussels, banks and payment providers with a clear problem. If the euro does not gain a credible role in tokenized payments, Europe risks watching its own financial infrastructure become increasingly dependent on foreign issuers and networks. The report points to a broader policy mix now under discussion – regulated stablecoins, tokenized deposits, a digital euro and bank-led blockchain infrastructure.

Adoption, though, will not be automatic. The EBA said consumers and businesses will need time to change payment habits, and any new instrument has to clear a high bar on compliance, security, resilience, cost and user experience. Stablecoins may have an edge on speed and costs, but the group said their core advantage over existing payment rails has yet to be proven. That leaves banks watching the next round of investment decisions closely, especially as stablecoin issuers, big tech firms and wallet providers push deeper into the payments stack.